Hi, I working in the automotive industry from last 8 years and my current gross salary is 68k per month. I did my my investment of 2.5lacs in Sahara fund and I think I have lost my money and no return I will get from their. I have also a LIC policy of 52k yearly. I also lost approx. 7lacs in stock marked and my current savings is nill. I just want to hear about financial planning how can I make robust plan so that I can free from all the liability at the age 45. I also have plan to purchase a house in NCR. My current age is 31 and I married.

Ans: Thank you for reaching out and sharing your financial situation. It’s commendable that you are taking proactive steps towards financial planning. Let’s work together to create a robust financial plan that addresses your current challenges and helps you achieve your goals.

Current Financial Situation Analysis

You’ve been in the automotive industry for the past 8 years, earning a gross salary of Rs 68,000 per month. It’s great that you have steady income. However, you’ve faced some financial setbacks.

Investment in Sahara Fund: Rs 2.5 lakhs, with concerns about losing this amount.
LIC Policy: Annual premium of Rs 52,000.
Loss in Stock Market: Approx. Rs 7 lakhs.
Current Savings: Nil.
Despite these challenges, your initiative to seek financial planning is commendable. Let's start by addressing each component and then create a plan for your future.

Understanding Your Goals

Debt-Free by Age 45: You aim to be free of liabilities by 45.
Purchase a House in NCR: You plan to buy a house in the National Capital Region.
Build a Robust Financial Plan: You want to ensure financial stability and growth.
Step-by-Step Financial Planning

1. Assessing and Addressing Current Investments

Sahara Fund Investment

Your investment of Rs 2.5 lakhs in the Sahara fund seems concerning. It’s essential to follow up on any legal recourse or regulatory updates regarding Sahara funds. However, for planning purposes, we will consider this amount as a potential loss.

LIC Policy Evaluation

LIC policies often come with high premiums and lower returns compared to mutual funds. Evaluating the surrender value of your policy can provide an option to reinvest in more lucrative investments. If surrendering the policy yields a reasonable amount, consider reinvesting it in mutual funds. Mutual funds offer better returns and flexibility.

Stock Market Losses

The Rs 7 lakhs loss in the stock market is significant. It highlights the need for a more structured approach to investing. Stock market investments can be volatile and risky without proper research and strategy. Moving forward, it’s crucial to diversify and possibly reduce direct stock market exposure.

2. Setting Up a Budget and Emergency Fund

Monthly Budget

Your gross monthly salary is Rs 68,000. Let’s create a budget to ensure effective allocation of your income:

Essentials (Rent, utilities, groceries): Rs 30,000
Insurance and premiums (LIC): Rs 4,333 (Rs 52,000 annually)
Savings and Investments: Rs 10,000
Discretionary Spending: Rs 10,000
Emergency Fund Allocation: Rs 13,667
This budget ensures you save consistently while covering your necessary expenses. Adjustments can be made based on your specific needs and circumstances.

Emergency Fund

An emergency fund is crucial for financial stability. Aim to save at least 6 months’ worth of expenses. With Rs 13,667 saved monthly, you’ll build an emergency fund of Rs 82,002 in 6 months. Continue this until you reach Rs 1.8 lakhs, providing a solid financial cushion.

3. Creating a Structured Investment Plan

Mutual Funds Investment

Considering the disadvantages of direct funds, investing through a Certified Financial Planner (CFP) can provide professional guidance. Let’s discuss the benefits of regular funds:

Professional Management: Actively managed funds have fund managers making informed investment decisions.
Regular Reviews: A CFP will review and adjust your portfolio as needed.
Diversification: Mutual funds offer a diversified investment portfolio.
Investment Allocation

Here’s a suggested investment allocation based on your monthly budget:

Equity Mutual Funds: Rs 6,000 (Higher growth potential but higher risk)
Debt Mutual Funds: Rs 4,000 (Stability and lower risk)
Emergency Fund: Continue saving Rs 13,667 monthly until you reach the target amount.
4. Long-Term Goals and Retirement Planning

Debt-Free by Age 45

To achieve this, focus on paying off any existing debts. If you have loans or credit card debts, prioritize clearing them. Use part of your savings and investment returns to accelerate debt repayment.

Retirement Planning

Start planning for retirement by investing in mutual funds and considering the Employee Provident Fund (EPF) if applicable. Regular contributions to EPF and mutual funds will create a substantial retirement corpus. Aim to increase your investment amounts as your income grows.

5. Planning for a House in NCR

Buying a house is a significant financial commitment. Here’s a plan to help you prepare:

Down Payment Savings: Save for the down payment, typically 20% of the property value. Assuming a house costs Rs 50 lakhs, you need Rs 10 lakhs for the down payment.
Monthly Savings Goal: Save Rs 20,000 monthly dedicated to the down payment fund. In approximately 4 years, you’ll have Rs 9.6 lakhs.
Home Loan Consideration: Evaluate home loan options. Ensure the EMI fits within your budget without straining your finances.
6. Tax Planning and Efficiency

Tax Benefits on Investments

Investing in Equity Linked Savings Schemes (ELSS) can provide tax benefits under Section 80C. Ensure you utilize the full Rs 1.5 lakhs limit for maximum tax savings. Contributions to EPF and LIC premiums also count towards this limit.

Tax Efficiency of Investments

Mutual funds, especially equity funds, offer tax efficiency. Long-term capital gains (LTCG) on equity mutual funds are taxed at 10% for gains above Rs 1 lakh. Debt funds have different tax implications but can be more tax-efficient than fixed deposits.

7. Regular Review and Adjustments

Financial planning is not a one-time activity. Regular reviews and adjustments are crucial. Schedule annual reviews with your CFP to assess the performance of your investments and make necessary changes. Life events, market conditions, and financial goals can change, requiring adjustments to your plan.

Empathy and Understanding

I understand that past financial losses can be disheartening. However, your proactive approach towards financial planning is commendable. It's important to learn from past experiences and make informed decisions going forward. Building a solid financial foundation takes time, but with consistent effort and strategic planning, you can achieve your goals.

Final Insights

Your journey towards financial stability starts with a structured plan. By addressing current investments, setting up a budget, creating an emergency fund, and investing wisely, you’ll build a robust financial future. Regular reviews and adjustments will ensure your plan stays on track.

Keep in mind the importance of professional guidance. A Certified Financial Planner can provide valuable insights and help navigate complex financial decisions. Stay committed to your financial goals, and you’ll achieve the security and stability you desire.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in